Rosneft battles debt after $55 billion deal goes sour

Rosneft battles debt after $55 billion deal goes sour

STEPHEN BIERMAN AND KSENIA GALOUCHKO

MOSCOW (Bloomberg) -- Igor Sechin, Rosneft’s CEO and a long-time ally of Russian President Vladimir Putin, had spent $55 billion in 2013 to buy competitor TNK-BP and create a Russian oil colossus, pumping about 5% of the world’s crude.

Almost two years later, investors have written off the deal. Battered by sanctions and a tumbling oil price, Rosneft has lost 32% of its market value this year in dollar terms and currently, the whole company is worth $51 billion.

Buying TNK-BP has left Sechin with a lot of debt to repay. State-controlled Rosneft owes about $60 billion to banks and bondholders, making it more indebted relative to earnings than any large oil producer apart from Brazil’s Petroleo Brasileiro. The combined company was expected to be $120 billion worth.

Rosneft, which achieved a market value of about $96 billion in the weeks after the TNK-BP deal was announced, has underperformed both Russian and international competitors this year.

Sanctions imposed to punish Russia’s annexation of Crimea and policy toward Ukraine will limit Rosneft’s access to refinancing for existing loans. The company has already applied for state funds to help repay $30 billion that’s due by the end of year.